Auto Finance Glossary: Key Buying and Leasing Terms

Buying or leasing a car or truck is exciting, but can be complicated. Using the right words when negotiating for a vehicle can help you make the best choice and save time and money. Below are a few key terms to keep in mind. To learn more about auto financing as well as buying, leasing, and insurance, visit Ally Wallet Wise at

  • Acquisition Fee: A processing or administrative charge included in many lease transactions. It may also be called an administrative fee.
  • Agreed-Upon Vehicle Selling Price: The price you agree to pay to buy a vehicle.
  • Agreed-Upon Value of the Vehicle: In a lease, the dollar amount you and the dealer determine will be used as the basis for calculating lease payments for a specific vehicle. This figure can be similar to the agreed-upon vehicle selling price in a purchase transaction.
  • Allowed Mileage: The number of miles that the lease allows the lessee to drive the vehicle without paying an extra charge – usually 12,000 to 15,000 miles per year.
  • Annual Percentage Rate (APR): The cost of credit expressed as a yearly rate.
  • Bank Draft: When you borrow money from a bank to buy a vehicle, a bank-issued check made out to the dealership to pay the agreed-upon vehicle selling price.
  • Creditor: A person or organization that extends credit.
  • Down Payment: Initial payment by the customer that is used to reduce the cash price.
  • Expected Depreciation: The amount by which a vehicle is expected to decrease in value over a specific period of time.
  • Finance Charge: The total dollar amount the credit will cost you to finance a purchase.
  • Gross Capitalized Cost: In leasing, the agreed-upon value of the vehicle and any items you pay for over the lease term and that are included in your lease balance (such as acquisition fees or a service contract).
  • Lease: An agreement between the owner of a vehicle (lessor) and the user (lessee) for the use of a leased vehicle subject to stated terms and conditions for a certain length of time and for an agreed-upon payment obligation.
  • Lease Agreement: The document that contains the lease terms, including terms and conditions for the use of the leased vehicle.
  • Lessee: The person who has possession and use of a leased vehicle during the lease term and is a party to the lease agreement.
  • Lessor: The owner of the leased vehicle.
  • Lien Holder: The creditor who has a security interest in the vehicle. If the vehicle owner doesn’t make the payments on the debt as scheduled, the one holding the lien can take and sell the vehicle as full or partial payment of the debt.
  • Purchase: A transaction in which a person acquires ownership of the item purchased.

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  1. 1
    jimmie jenkins

    turn in my lease 1st of March and lease a new 2015 Chevy Silverado 4×4 standard box this is what I plan to do been doing business with u for 3 yrs I hope this won’t be a problem

  2. 6

    Great Article. article , I Appreciate the insight ! Does anyone know where I might get ahold of a template Residential Real Estate Lease form to work with ?

  3. 8

    I am nearing completion of my 39 mo. lease on a 2013 vehicle. Love the vehicle and undecided whether to keep it. How would end of lease price be financed by Ally if I decide to keep it and finance through Ally?

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